03/30/2015

A recent decision by the United States Court of Appeals for the Federal Circuit (Federal Circuit) highlights the very substantial risks that subcontractors run in continuing performance under a financially troubled prime contract based upon government urgings and assurances of indirect payment for further services, as well as the difficulties faced by a subcontractor seeking to hold the government directly liable in such circumstances under a third-party beneficiary theory. G4S Technology LLC v. United States, CAFC No. 2014-5078, decided March 6, 2015. The decision does, however, provide some guidance on what subcontractors should do to protect themselves before continuing work under a troubled contract.

The case arose out of a $267 million loan from the Department of Agriculture’s Rural Utilities Service (RUS) to Open Range Communications, Inc. (Open Range) to finance construction of wireless broadband networks. As part of the loan agreement, RUS required Open Range to keep a pledged deposit account into which RUS would advance loan funds as needed. To receive these funds, Open Range was required to submit financial statements outlining the purpose of each advance, including relevant invoices and purchase orders, and Open Range was expected to use the advanced funds for the stated purposes.

RUS anticipated that Open Range would use subcontractors, and required that the subcontractor relationships be formalized through Master Service Agreements (MSAs) between Open Range and the respective subcontractors using RUS-approved format, including technical specifications, pricing information, target completion dates and other requirements. RUS edited and formally approved a generic MSA for Open Range to use, and Open Range entered into one of these MSAs with G4S.

Unfortunately, the project encountered difficulties, and Open Range began failing to meet its payment obligations to its subcontractors, who threatened to stop work. To encourage the subcontractors to continue work, RUS made additional money available to Open Range and sent a letter to Open Range stating the project was moving forward. RUS issued two further public letters, stating it intended to downsize, but would continue funding, the project. Despite further funds advances, Open Range was unable to pay G4S the full amount owed, and subsequently filed for bankruptcy. While the bankruptcy proceedings were ongoing, G4S filed suit in the Court of Federal Claims (COFC) seeking, as a third party beneficiary, to recover directly from the government monies due for work authorized and approved by RUS that G4S performed after receiving RUS’s and Open Range’s payment assurances.

The government moved to dismiss for lack of privity. The COFC rejected Open Range’s argument and granted judgment in favor of the government. G4S appealed to the Federal Circuit, which affirmed the COFC’s decision, stating that third-party beneficiary status is available “only if the contracting parties so intend” and that “[t]his intent may be either ‘express or implied,’ and it must be ‘fairly attributable to the contracting officer. . . . In addition, the benefit to the third party must be ‘direct.’”

Here, the prime contract contained no express declaration of intent. G4S therefore relied on RUS’s additional funding and letters regarding the project as evidence that RUS intended to bind itself to Open Range’s subcontractors. The Court did not dispute that RUS wanted the subcontractors to continue work. However, such circumstantial evidence has to “be considered in the context of the government’s responsibilities to safeguard taxpayer funds and advance the public interest” and, when viewed in such context, was “entirely consistent with the government’s general duty to protect the public interest” and, “If anything, this sort of governmental response should be encouraged.”

In cases where the COFC has found a subcontractor to be a third party beneficiary based on a payment mechanism, the subcontractor was paid by the government more directly, e.g., through a joint payment arrangement or escrow for benefit of the subcontractor. Here, however, the payments were made into the prime contractor’s “general fund,” even though RUS knew subcontractors were due certain portions of the fund. The Court characterized RUS’s various statements and letters as nothing more than efforts to rebuild Open Range’s credibility, and merely “reinforce[d] the conclusion that Open Range, not RUS, was the party entering into obligations with subcontractors such as G4S,” and that RUS thus “did not express any intent that it be held liable for payments to subcontractors.”

This decision demonstrates the high hurdles faced by subcontractors seeking to recover directly from the government, and the limits of a third party beneficiary theory. Before agreeing to continue work at the government’s urging, subcontractors would do well to require direct government financial commitments, such as the joint payment or escrow arrangements cited by the Court or some other similar direct payment mechanism or assurances.

A recent Postal Service case reminds us how important it is to know how to proceed if your contract is terminated. Clifford B. Finkle, Inc. v. U.S. Postal Service, PSBCA No. 6540 (March 25, 2015). The Postal Service terminated with notice a contract with Clifford B. Finkle Inc. (CBF) who then (i) appealed the termination to the Postal Service Board of Contract Appeals (Board) and subsequently (ii) filed a monetary claim with the contracting officer (CO). When the CO denied its monetary claim, CBF failed to appeal the CO’s decision, despite the fact that the CO provided written notice of the appeal rights and counsel for the Postal Service sent CBF an email admonishing them to “keep in mind” that CBF has a “90 day deadline to appeal the recent final decision.” CBF didn’t listen. The Postal Service moved to dismiss the termination appeal arguing the Board lacks jurisdiction where, as here, the contractor (i) challenges a termination without a monetary claim and prior to receiving a decision from the CO and (ii) fails to file a notice of appeal within 90 days of receiving the CO’s final decision on its monetary claim.

As most of us know, the Contract Disputes Act (CDA) requires that contractor claims be in writing, certified (if over $100,000), and submitted to the contracting officer for a decision. The contracting officer must then issue a decision in writing, whereupon the contractor, if it wants to appeal this decision to the Board, must do so within 90 days from the date of receipt of the decision. The Board is then authorized to hear and decide the contractor’s appeal from the decision of the contracting officer.

The question is whether a contractor’s challenge of a termination with notice or for convenience, standing alone, confers jurisdiction on the Board. The answer is clear: “Unlike a termination for default … which can be challenged under the CDA without an additional monetary claim … a termination with notice or termination for convenience is a contract action … not a contracting officer’s decision. Without a monetary claim submitted to the contracting officer, the Board has no jurisdiction over a challenge to a termination for convenience or termination with notice action.”

CBF’s notice of appeal challenged only the Postal Service’s termination with notice and, thus, did not confer jurisdiction on the Board. True enough, CBF subsequently filed a monetary claim which the CO denied, but it then failed to appeal the denial within 90 days. The 90-day deadline to appeal the CO denial is “strictly construed and failure to appeal within 90 days precludes the Board from taking jurisdiction to consider the case on its merits.” A Board of Contract Appeals “may not waive this ninety-day statutory period.”

As it thrashed around to find a basis for Board jurisdiction, CBF argued that its notice of appeal challenging the termination should be construed to cover the subsequently issued CO decision on CBF’s monetary claim. No such luck. As the Board pointed out, it has “long [been] held that the jurisdictional standard must be applied to each claim, not an entire case; jurisdiction exists over those claims which satisfy the requirements . . . .”

CBF made a mess of its termination and, as a result, eliminated any possibility of obtaining relief. Don’t make the same mistake. Know the rules and follow them. If you don’t, you’ll see that Boards have hearts of stone.

On March 27th the Department of Justice announced that Lockheed Martin Corporation will pay $2 million for allegedly overbilling the government during its manufacturing of C-130 aircraft for the United States Air Force. Justice Department Press Release.

Lockheed manufactured C-130s for the U.S. Air Force from 2006 to 2013 under contracts where the Government provided Lockheed with up to 22,000 gallons of fuel (characterized as government furnished property or GFP) per aircraft. This GFP fuel was to be used for the “engine runs, fuel operations and test flights necessary to manufacture C-130s”. If and when Lockheed depleted its fuel allotment for a particular aircraft, Lockheed, not the Government, was to absorb the cost of any additional fuel. But the government’s investigation indicated this was not what happened. According to the allegations, Lockheed routinely ran over the allotted 22,000 gallons, but did not reimburse the government for the additional fuel. Apparently Lockheed may also have used some of the allotted GFP fuel “on other unrelated projects, where the government was either not a party, or had not agreed to furnish fuel.”

According to Acting U.S. Attorney John Horn, “Here, in causing the government to pay for fuel that was the company’s financial responsibility, Lockheed failed to live up to the terms of the contracts and caused financial injury to the government. The settlement reflects our resolve to ensure that companies that overbill or overcharge the Government will be identified and held responsible for their actions.”

This settlement ends what are characterized as the long and tireless investigative efforts of Defense Criminal Investigative Service agents and the Air Force Office of Special Investigations.

03/23/2015

Most contractors have at least a general understanding that suspension and debarment should be avoided like the plague. Being found nonresponsible and, therefore, ineligible to do business with the government (or its prime contractors and subcontractors) would be a death knell for many companies. As many contractors know, however, you can challenge a notice of suspension and debarment -- and even win -- but the cost of achieving a victory often comes in the form of an administrative agreement, as demonstrated by FedBid’s recent experience with the Air Force.

On January 26, 2015, reverse auction vendor FedBid and its CEO, Ali Saadat, were suspended and proposed for debarment by the Air Force. The Air Force had taken the lead in an interagency review of the company’s actions described in a report issued last September by the Department of Veterans Affairs’ Inspector General. That report alleged that FedBid had engaged in improper conduct “reflecting adversely on its responsibility” under FAR Subpart 9.4.

In response to the suspension, FedBid submitted information describing its efforts to ensure the integrity and propriety of its business practices. Even before the suspension, FedBid went so far as to split itself into two companies, one focused on federal contracting (FedBid) and the other, a subsidiary called EPS Commerce, Inc., concentrated on commercial business. As part of that reorganization, Mr. Saadat was to work exclusively with EPS and FedBid hired a new CEO and management team.

After three weeks of negotiation, the Air Force and FedBid agreed to an Administrative Agreement “intended to provide assurances to the Government that FedBid is presently responsible and that, notwithstanding the basis for the debarment, FedBid can be trusted to deal fairly and honestly with the Government and that the debarment of FedBid is not necessary in this case.” The Air Force did not change its plan to debar Mr. Saadat.

The Administrative Agreement terminating FedBid’s debarment presents a laundry list of standard actions contractors are routinely required to take to establish present responsibility, including an ethics and compliance program with the following components: (i) a comprehensive information and education program for all employees consisting of at least one hour of training annually; (ii) a written Code of Conduct circulated to all employees and annual certifications from employees that they have read and understood the Code; (iii) a 24-hour, toll-free ethics hotline publicized by prominent notices at every company facility; (iv) written performance standards for evaluation of managers that include program compliance; (v) a Chief Compliance Officer with suitable background and experience; (vi) robust reporting, including quarterly reports of suspected misconduct, procurement-related and ethics investigations, management changes, and legal proceedings involving the company; and (vii) a written policy addressing how FedBid will avoid doing business with suspended or debarred entities.

FedBid also agreed to a number of more fact-specific requirements such as significant restrictions on its relationship with Mr. Saadat – e.g., during the period of Saadat’s suspension and debarment he cannot serve as an employee, agent, or consultant of FedBid, be involved in any way with the company’s operation or management, or obtain or exercise any ownership right to vote any stock in FedBid on any matter involving the company’s operation and management. In short, Saadat is cannot have any influence on the operation and management of FedBid.

FedBid's experience and the terms of the resulting Administrative Agreement provide contractors facing similar issues with a useful guide to the sorts of steps a contractor must undertake to establish present responsibility and to succeed in having a suspension or debarment lifted. Indeed the Administrative Agreement is a roadmap to compliance and training strategies the Government has found to be effective and sufficient – one that contractors may want to review to assess the sufficiency of their current compliance programs.

Relief is on the way. Over the past several years the alarming increase in the use of LPTA procurements has been criticized, particularly where the government might realize “best value” from an innovative, cost-effective solution. This criticism has now gained an important voice and concrete support in the form of new Department of Defense (DOD) policy guidance urging “limited” use of LPTAs only in “appropriate circumstances.”

Specifically, on March 4, 2015, the Under Secretary of Defense for Acquisition, Technology and Logistics, Frank Kendall III, issued a Memorandum providing new guidance as to the “Appropriate Use of Lowest Priced Technically Acceptable Source Selection Process and Associated Contract Type.” Kendall stated that LPTA has “a clear, but limited place in the source selection ‘best value’ continuum.” LPTA is “appropriate ... only when there are well-defined requirements, the risk of unsuccessful contract performance is minimal, price is a significant factor in the source selection, and there is neither value, need, nor willingness to pay for higher performance.”

Kendall clarified that “[w]ell-defined requirements equates to technical requirements and ‘technical acceptability’ standards that are clearly understood by both industry and government, are expressed in terms of performance objectives, measures, and standards that map to [DOD] requirement documents, and lend themselves to technical evaluation on an acceptable/unacceptable basis.” He stated that “LPTA offers a streamlined and simplified source selection approach to rapidly procure … commercial and non-complex services and supplies.” According to Kendal, [u]sed in appropriate circumstances and combined with effective competition and proper contract type, LPTA can drive down costs and provide the best value solution.… If not applied appropriately, however, the Department can miss an opportunity to secure an innovative, cost-effective solution ... to help maintain our technological advantage.”

Kendall cited a vehicle maintenance contract with precise availability rates and scheduled maintenance requirements as a “good example” of an LPTA procurement. However, where “the tasks, efforts, and required outcomes” cannot be firmly predicted, a Cost-Plus-Fixed-Fee, Term, Level of Effort (CPFF LOE), or in some circumstances a Time-and-Materials (T&M) contract are better. Kendall reiterated DOD’s preference for CPFF LOE, which he stated is “well-suited” to professional and management services requirements, and provides greater flexibility and incentives for cost control, labor efficiencies and savings.

Hopefully, this new guidance will result in a more judicious and limited use of LPTA, at least within DOD. Based on this new DOD guidance, offerors should not hesitate to question and seek reassessment by higher level acquisition personnel when solicitations inappropriately use LPTA.

Darneille will co-present a workshop on “Your Strategic Toolbox Update: Teaming, Joint Ventures, Subcontracting & Mentor-Protégé Agreements in Today’s Changing Procurement Environment,” with Melissa Loder, the principal Business Opportunity Specialist in the U.S. Small Business Administration’s (SBA) West Virginia District Office.

This workshop will include a discussion of the risks of affiliation, timing requirements and other critical issues in drafting agreements, and will include real-world examples addressed in recent SBA Office of Hearings and Appeals (OHA), Government Accountability Office (GAO) and Court cases. Darneille and Loder also will cover recent regulatory developments, including SBA’s ongoing size standards changes, proposed implementation of statutory changes to the limitations on subcontracting rules, SBA’s new “Safe Harbor” rule, the new authorization of WOSB sole source set-asides, the proposed new universal mentor-protégé program and proposed changes to the current joint venture and affiliation rules.

03/17/2015

Small businesses participating in the Small Business Administration’s (SBA’s) 8(a) Business Development Program (BD Program) would do well to recall the story of Pinocchio, the marionette who wanted to be a real boy. Pinocchio learned two important lessons: be self-reliant and don’t lie. Similarly, the petitioner in the recent The Desa Group, Inc., SBA No. BDPT-543 (February 5, 2015) decision was given credit for trying to tell the truth, but found out the hard way that you cannot rely too heavily on another, non-disadvantaged, entity. The decision makes clear it is not enough that a socially and economically disadvantaged business be free from the control and management of a non-disadvantaged business; overreliance on the non-disadvantaged business may independently lead to the 8(a) firm’s termination from the BD Program.

The appeal arose in response to the SBA’s termination of The Desa Group (DGI) from the 8(a) BD Program based on two grounds set forth in SBA’s Regulations (13 C.F.R. §124.202): DGI alleged (i) submission of false information in its program application, and (ii) failure to maintain full-time, day-to-day management and control by a disadvantaged individual. Specifically, SBA received a tip that DGI’s president, Dionne Fleshman, whose socially and economically disadvantaged status qualified DGI for the 8(a) BD Program, actually worked for DESA Inc. (DESA) and did not manage DGI. DESA was owned by Ms. Fleshman’s mother, Diane Sumpter, who is no longer disadvantaged.

On appeal, OHA rejected SBA’s conclusion that DGI should be terminated from the program based on Ms. Fleshman’s allegedly false statements in the Program Application, finding her statements contained merely honest and reasonable mistakes. Absent evidence of intent to deceive SBA, OHA concluded that inaccurate statements are not grounds to terminate an 8(a) firm from the BD Program. OHA also rejected the SBA’s finding that DGI was managed and controlled by a non-disadvantaged individual (Ms. Sumpter), after considering and rejecting the evidence on which SBA based its conclusions: that (i) DGI and DESA were referenced on each other’s LinkedIn and Facebook profiles and company websites; (ii) Ms. Fleshman was listed as a “leader” on DESA’s website and earned between $7,000-$10,000/month from DESA over a two-year period; and (iii) DGI’s website referenced the accomplishments of DESA.

OHA found that none of the evidence identified by SBA established that DESA controlled DGI. For example, according to OHA, DESA and DGI’s references to each other on their websites only showed that DESA and DGI were related. Moreover, the monthly payments to Ms. Fleshman were actually payments to DGI under a subcontract from DESA and did not establish that Ms. Fleshman worked for DESA instead of DGI. OHA concluded that, at most, the evidence showed that DGI and DESA were interconnected, not that DGI was controlled or managed by DESA or Ms. Sumpter.

But OHA’s inquiry did not end there however. OHA considered additional evidence and, based on this evidence, concluded that DGI and DESA were so interconnected that their business relationship interfered with DGI’s ability to “exercise independent business judgment without great economic risk” – a different basis for terminating DGI from the 8(a) BD Program.

This decision underscores for 8(a) firms the importance of closely examining their relationships with individuals and entities that are not disadvantaged. Even if such individuals or entities do not manage, own or control the participant, the 8(a) firm’s interconnectedness with non-disadvantaged companies and individuals (including sufficiently substantial contractual relationships) may still be enough to justify the 8(a) firm’s termination from the BD Program. On a positive note, The Desa Group, Inc. decision should provide 8(a) BD Program applicants with a sense of relief that an honest misunderstanding about an application question is unlikely to provide grounds for 8(a) BD Program termination.

On December 4, 2014, the Office of Federal Procurement Policy (OFPP) announced a new strategic plan to create a more innovative, effective and efficient federal acquisition system. This plan focusses on three core elements: (1) buying as one through Category Management, (2) driving innovation through developing and deploying talent and tools across agencies, and (3) building stronger vendor relationships. On Friday, March 6, 2015, OFPP Administrator Anne Rung posted a 90-Day Progress Report, reporting on interim developments and announcing next steps. Contractors need to be aware of these developments and plan for coming changes.

Building Stronger Vendor Relationships: Interestingly, while this item was addressed third in the December 4, 2014 Memo, it is listed first in the Update. This reordering reflects the importance being placed on reaching out to and partnering with industry to obtain input, identify and reduce unnecessary burdens, and incorporate commercial best practices. As stated in the December 14, 2014 Memo, “Early, frequent, and constructive engagement with industry leads to better outcomes . . . particularly important for complex, high-risk procurements, including those for large IT projects.” To this end, the first-ever Government-sponsored online “Open Dialogue” was launched last spring, drawing almost 500 participants. OFPP also has taken other steps, including partnering with the General Services Administration (GSA) to improve customer-facing tools and simplify the Federal Supply Schedules (FSS) process. One important early step flowing-out of the latter is GSA’s March 4, 2015 Federal Register Notice (80 Fed. Reg. 11619), proposing major changes to GSA’s pricing mechanisms, including changes to the Price Reduction Clause.

The Update announces that OFPP “will issue guidance to agencies directing them to seek feedback from vendors and internal stakeholders – such as contracting officers and program managers – on how well certain high-dollar IT acquisitions perform … us[ing] Acquisition 360, the first ever transaction-based feedback tool that allows agencies to identify strengths and weaknesses in their acquisition processes with the focus on pre-award activities, contract execution, and certain post award activities, such as debriefings.” Additionally, OFPP is preparing for a second Open Dialogue beginning this spring, “to get industry feedback on steps being taken to ease contractor reporting and improve commercial item acquisitions – issues raised by stakeholders in our last open dialogue.”

Category Management: Perhaps the most substantive and far-reaching aspect of the new strategic plan is the move to implement and institutionalize purchasing government-wide through “Category Management” that breaks down federal spending into 10 common categories, such as IT, professional services, security & protection, facilities & construction, etc., and treats them as individual business units. According to OFPP, “Each category will be led by a senior Government executive who is a true expert in the category and who will develop a Government-wide strategy to drive improved performance.” The idea is to collect and share important contract and pricing information in a central location called the Acquisition Gateway, and to coordinate future buys.

The CMLC has prioritized the collection of IT contracts, and the Update anticipates that “[i]n a few short months, the government acquisition workforce will have access to key information for all major IT commodity contracts across government, including bureau-wide, agency-wide and government-wide contracts.”

Driving Innovation: The December 4, 2014 Memo detailed various steps already taken, and further steps directed, to enhance workforce training and the use of technology, and instill a culture that rewards and drives creativity. The Update states that “progress has been made,” and that the Government will soon launch a “TechFAR Hub” on the Acquisition Gateway. In addition, OFPP has “drafted an initial plan for training and deploying a cadre of certified digital IT acquisition professionals to agencies to assist in this area,” and “will encourage agencies to stand up ‘Buyers Clubs,’ as [Health and Human Services] did last summer, to test, document, and scale new ideas.”

Conclusion: The bottom line is that major changes are coming, as the Government continues to deal with reduced budgets and the need to get more for the money, while at the same trying to simplify the acquisition process, particularly in the IT arena, effectively and on a cost-efficient and timely basis. Industry needs to participate in this evolving process, and stay informed and be prepared for the coming changes.

The Department of Veterans Affairs (VA) has adopted a final rule establishing the procedures governing Service-Disabled Veteran-Owned Small Business (SDVOSB) and Veteran-Owned Small Business (VOSB) status protests. This action resolves, at least for now, the issue as to whether status protests involving VA procurements will be transferred to the Small Business Administration (SBA), which processes protests involving non-VA procurements. There will continue to be parallel, but separate, regimes for VA and non-VA procurement SDVOSB and VOSB status protests. Companies wanting to file such protests will need to make certain they file their protests and appeals according to the correct/applicable rules.

The final rule adopts, as final, VA’s 9/30/13 interim rule amending the SDVOSB and VOSB status protest procedures in Section 819.307 of the VA Acquisition Regulation (VAAR) to provide that such protests be initially adjudicated by VA’s Director, Center for Verification and Evaluation, and that either the protesting or protested party can appeal to the Executive Director of VA’s Office of Small and Disadvantaged Business Utilization within no more than five business days of receipt of the initial status protest determination. The rule also provides that when a SDVOSB or VOSB status protest is sustained after the award of a contract, the contract will be deemed void and the contracting officer must cancel the contract and award to the next eligible SDVOSB or VOSB in line for award. Moreover, the ineligible SDVOSB or VOSB is precluded from submitting another offer on a future set-aside procurement unless it successfully appeals or applies for and receives verified SDVOSB or VOSB status in accordance with 38 C.F.R. Part 74.

The final rule reasserts VA’s determination to keep this function in-house at VA, rather than transferring it to SBA, on the grounds that (1) the VA program is founded in Title 38 of the U.S. Code, which is applicable solely to VA acquisitions, and (2) VA has developed “appropriate internal expertise in adjudicating SDVOSB/VOSB status protests.”

Offerors wishing to protest the status of a SDVOSB or VOSB on a VA procurement need to follow the procedures set forth in VAAR 819.307.

03/09/2015

1970. Ford produced its first Pinto. Ronald Reagan was re-elected governor of California. Claudia Schiffer was born. The Kansas City Chiefs won the Super Bowl. And the current Federal Sex Discrimination Guidelines (Guidelines) were written. At the time, no one could have imagined that the Pinto would develop a reputation as one of the worst cars ever made, Reagan would be elected the 40th President of the United States, Schiffer would become an international supermodel and the Kansas City Chiefs wouldn’t return to the Super Bowl for at least 40 years. Nor could they have reasonably believed that the old Guidelines, which apply to federal contractors working in the United States with contracts valued in excess of $10,000, would still be in place forty-four years later. That is about to change.

Given the cultural sea change since 1970, it’s hardly surprising that the 1970 Guidelines are anachronistic and fail to reflect the realities of the workplace in the 21st century. Attempting to remedy this problem, the Office of Federal Contract Compliance Programs (OFCCP) issued a Notice of Proposed Rulemaking on January 30, 2015, seeking to replace the Guidelines with regulations that “align with current law and legal principles and address their application to current workplace practices and issues.”

The proposed rules align OFCCP’s standards with Title VII and amendments thereto, including those made by the Equal Employment Opportunity Act, the Pregnancy Discrimination Act, the Civil Rights Act of 1991 and the Lilly Ledbetter Act of 2009. OFCCP proposes deleting out-of-date provisions, including paternalistic protections for women under which an employer could discriminate against a woman “for her own good” in certain occupations, such as those that may pose reproductive health hazards. In eliminating such “protections,” the proposed rule implicitly acknowledges that women are able to conduct their own risk-benefit analyses of their employment options.

The proposed rule’s recognition that sex-based discrimination includes not only gender-based discrimination but also sexual identity and sex-based stereotypes is another leap into the 21st century. Notably, the proposed rule adds protections for transgendered employees regardless of whether the employee has undergone or plans to undergo gender reassignment surgery. Likewise, the proposed rule prohibits discrimination against men or women who fail to conform to gender stereotypes regardless of gender identity or sexual orientation. Based on the proposed rule, a contractor may not treat unmarried men and women differently, thereby addressing anachronistic stereotypes that bachelors are enviable playboys, while unmarried women are “old maids.”

The proposed rule’s protections for pregnant women have also increased partly in response to both the greater percentage of pregnant women working and their doing so through their last month of pregnancy. Between 1966 and 1970, only 39% of working pregnant women continued their employment into their last month of pregnancy; in comparison, from 2006 to 2008, the percentage of employed pregnant women working through their final month of gestation was 82%. The changes not only prohibit discrimination based on pregnancy and childbirth, but also prohibit practices that may dissuade pregnant women from working. Such changes are among the ways the proposed rule recognizes that disparate impact discrimination is not limited to the hiring process, but may result from the failure to provide appropriate facilities to men and women. In a particularly colorful example, OFCCP’s Notice of Rulemaking highlights “an employer policy requiring crane operators to urinate off the back of the crane instead of using a restroom,” as a practice that would discriminatorily disparately impact women.

These examples represent only a sample of OFCCP’s proposed changes to the Guidelines. Given the scope of the overhaul, one might expect the estimated cost of implementation to be significant. OFCCP thinks otherwise, and estimates minimal costs associated with the proposed rule because it is intended merely to align with existing laws rather than to create or implement new standards. In fact, because the proposed rule only seems to adopt existing laws and policies, contractors already likely operate in compliance with the proposal.

The public may submit comments on the proposed rule until March 31, 2015 by visiting this website. However, given that the proposed revisions are not only long-overdue, but also consistent with existing law and impose a minimal economic burden, it seems likely that the majority of the proposal will become final. Accordingly, federal contractors with grants in excess of $10,000 would benefit from ensuring compliance with title VII by reviewing and updating as necessary, existing policies and informal practices related to their treatment of men, women and transgendered individuals in the workplace.